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Old 12-03-2014, 12:01 AM   #2251
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I hope prices come down. My wife and I have good jobs, but can't afford anything we'd want to live in.
SCIC. I'm looking for a house now but I'm torn if its smart to buy after the run up we had.
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Old 12-03-2014, 10:13 AM   #2252
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Does anyone buy properties in poor neighborhoods for cheap, fix them up, rent them out to questionable people and hope for the best?

I have some money saved up and pretty familiar with doing renovations that I could fix a completely run down place up. There are areas by us that are really cheap for multi family housing. The area has absolutely no hope of ever becoming better, it will simply stay a run down for the rest of it's days, resulting in the low prices. I know of two people that keep snatching these properties up (one guy has 300+ units), and doing the minimum, renting them out. It seems like they will often get section 8, which at least you're guaranteed the money every month, and probably the only way to do it. Is there any method or paper avenues you have to take to be able to rent to section 8 tenants?

I think I'm considering looking into this, but would have to really detach my mindset from caring about the property or what the tenants do. The ROI also seems much better buying and renting in this area than a nicer area, but there wont be any property appreciation in the end.

Otherwise I'm considering looking into Newark again. If anyone is familiar with NJ and wants to chime in. I know it's bad, they've been trying to make it better, I think it will be a very, very slow road but should start to get better.
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Old 12-03-2014, 10:18 AM   #2253
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Originally Posted by LostAndFound View Post
Does anyone buy properties in poor neighborhoods for cheap, fix them up, rent them out to questionable people and hope for the best?

I have some money saved up and pretty familiar with doing renovations that I could fix a completely run down place up. There are areas by us that are really cheap for multi family housing. The area has absolutely no hope of ever becoming better, it will simply stay a run down for the rest of it's days, resulting in the low prices. I know of two people that keep snatching these properties up (one guy has 300+ units), and doing the minimum, renting them out. It seems like they will often get section 8, which at least you're guaranteed the money every month, and probably the only way to do it. Is there any method or paper avenues you have to take to be able to rent to section 8 tenants?

I think I'm considering looking into this, but would have to really detach my mindset from caring about the property or what the tenants do. The ROI also seems much better buying and renting in this area than a nicer area, but there wont be any property appreciation in the end.

Otherwise I'm considering looking into Newark again. If anyone is familiar with NJ and wants to chime in. I know it's bad, they've been trying to make it better, I think it will be a very, very slow road but should start to get better.
My contractor does this. He puts his houses on the HUD list, meaning, he's pretty much guaranteed to get more than the going rate in bad neighborhoods. Once the houses are brought up to the HUD standards, he says it's pretty easy to get them on the list and rented.

I've heard horror stories about tenants wrecking the places, but, you're only spending a few grand (typically) to bring them back up to code.

He's got around 50 units waiting on renovation.

YMMV
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Old 12-03-2014, 10:19 AM   #2254
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300+ houses?
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Old 12-03-2014, 10:21 AM   #2255
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Originally Posted by nonissan View Post
My contractor does this. He puts his houses on the HUD list, meaning, he's pretty much guaranteed to get more than the going rate in bad neighborhoods. Once the houses are brought up to the HUD standards, he says it's pretty easy to get them on the list and rented.

I've heard horror stories about tenants wrecking the places, but, you're only spending a few grand (typically) to bring them back up to code.

He's got around 50 units waiting on renovation.

YMMV
Also another reason why it seems like its usually contractors, plumbers, etc that do this. The guy I mentioned started off as a plumber.

For my mom to buy in a poor neighborhood and take that risk of them wrecking the house and her having to pay a contractor to fix it, it wouldn't be worth the risk. But if you know what you're doing, cheap labor, contractor grade cheap **** materials, it doesn't cost all that much to fix, unless they really go ape **** on your place.
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Old 12-03-2014, 10:22 AM   #2256
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300+ houses?

Units, so houses, apartment buildings, etc. He's been doing this since he came to the country 30+ years ago.
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Old 12-03-2014, 10:33 AM   #2257
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Also another reason why it seems like its usually contractors, plumbers, etc that do this. The guy I mentioned started off as a plumber.

For my mom to buy in a poor neighborhood and take that risk of them wrecking the house and her having to pay a contractor to fix it, it wouldn't be worth the risk. But if you know what you're doing, cheap labor, contractor grade cheap **** materials, it doesn't cost all that much to fix, unless they really go ape **** on your place.
All of this. However, if you do find a good, trustworthy crew, you don't have to be a contractor to get things fixed on the cheap.
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Old 12-03-2014, 10:55 AM   #2258
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I've been trying to get into this. I've been helping other people flip and buy investment houses so much lately that I figure why not do it myself. I have access to all the homes for sale and can make real estate commissions when I buy them to go towards fixing them up.
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Old 12-03-2014, 11:13 AM   #2259
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Does anyone buy properties in poor neighborhoods for cheap, fix them up, rent them out to questionable people and hope for the best?
Other option is handing the property over to a management company. You buy the property, pay for repairs, they fix, maintain, collect rent, etc. You don't make as much money but also have a lot less headaches.
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Old 12-03-2014, 11:38 AM   #2260
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Other option is handing the property over to a management company. You buy the property, pay for repairs, they fix, maintain, collect rent, etc. You don't make as much money but also have a lot less headaches.

You're right about this. My mom works for a management company, and I did for a while one summer as well. About ~$100 per unit seems to be the rate round here, and certainly something to consider down the road. I would think its a smart move to do it that way rather than have the owner be so hands on in a run down area. I feel shady tenants would really exploit that somehow.

Hell, right now being the home owner and having tenants/friends live in there is just a mess of a situation for me.
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Old 12-03-2014, 02:03 PM   #2261
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On topic, from personal finance thread. I was wrong about timing, interest rates have not gone up as I expected.

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It's not a belief, it's a supposition. I'm bored and an engineer, so I went through it at lunch today. Only read on if you think of things in terms of how close to math it works out. Warning: engineer mind below.

Mortgage Payment: P = principal, r = interest rate per period, n = number of periods, k = number of payments, R = monthly payment

R = P × r / [1 - (1 + r)^(-n)]

for one payment R = 2813 (4.2% rate and 715000 house w/20% down Porig = 572000) and n = 360(30 year mortgage monthly) and solve for P in terms of R, you get an equation of

Pnew = 2813 * [1-(1+r)^-360]/r

Now there's an equation with a fixed payment that should show mortgage variation in terms of interest rate. Sweep interest rate from 1% to ~13% and you get a nice line Pnew showing perfectly correlated prices with rates. If you plot this set of points it shows a non-linear relationship.

Now figure out percentage change as a simple equation of
%change = -(Porig - Pnew)/Porig

To account for correlation introduce a correlation variable 1<c<0 (a percentage expressed in decimal) and plot

Pcorr = Porig+%change*c*Porig

and you get a graph like this for the two sets of numbers and c = 0.2


This shows that if prices only move 20% of perfect correlation a median house this year would decrease 16% in value if rates hit 8%.

I know this is ignoring a lot of stuff (inflation, time value of money, return on money invested decreasing future mortgage) but I'll probably put them in this model later on as I refine it. I do have a LITTLE real work to do.
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Old 12-03-2014, 02:03 PM   #2262
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Originally Posted by nonissan View Post
My contractor does this. He puts his houses on the HUD list, meaning, he's pretty much guaranteed to get more than the going rate in bad neighborhoods. Once the houses are brought up to the HUD standards, he says it's pretty easy to get them on the list and rented.

I've heard horror stories about tenants wrecking the places, but, you're only spending a few grand (typically) to bring them back up to code.

He's got around 50 units waiting on renovation.

YMMV
I was renting a home via HUD. It wasn't too bad of an experience, rent was direct deposited, and the tenants are getting free rent, so they don't want you to report them to their case managers and get them in trouble and risk losing their govt handout. The tenants supplied the deposit out of their pocket, so what I saw was minimal risk of trashing the place. It was a decent, but not great, little place. I would advertise it on craigslist and it was 1000sqft 2br/2ba. It also helped that I priced it around $750, which would be hard to find an apartment for that price. The neighborhood was getting trashier by the year though.

My problem was the house constantly needed repairs and it was a 4hr drive away, so I always had to pay top dollar for simple one-off repairs. We sold it and took our profit even though we could have made much more renting it out for a few more years.
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Old 12-03-2014, 02:17 PM   #2263
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Old 12-03-2014, 04:35 PM   #2264
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Originally Posted by tegan_ca View Post
On topic, from personal finance thread. I was wrong about timing, interest rates have not gone up as I expected.

Approve. How did you decide on a correlation of 0.2?
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Old 02-18-2015, 09:48 AM   #2265
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Getting ready to sell my condo, and my current tenants mentioned that they may want to buy it. I haven't signed with a real estate agent yet (was planning on doing this next week).

How can I sell the condo to them without using a realtor? From my limited research (so far) on the matter, it looks like it could be done with just a real estate lawyer to write a good contract, and a title company.

Anyone more experienced than I in this matter?
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Old 02-18-2015, 10:21 AM   #2266
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Getting ready to sell my condo, and my current tenants mentioned that they may want to buy it. I haven't signed with a real estate agent yet (was planning on doing this next week).

How can I sell the condo to them without using a realtor? From my limited research (so far) on the matter, it looks like it could be done with just a real estate lawyer to write a good contract, and a title company.

Anyone more experienced than I in this matter?
Don't even need a lawyer, someone at the title company could probably handle the paperwork for you for a few hundred dollarbucks. Is your title clean (no liens/encumbrances ?)
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Old 02-18-2015, 10:32 AM   #2267
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Don't even need a lawyer, someone at the title company could probably handle the paperwork for you for a few hundred dollarbucks. Is your title clean (no liens/encumbrances ?)
Clean title. Bought it in 2001, refinanced in 2002. Only one mortgage on it.
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Old 02-18-2015, 10:47 AM   #2268
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Clean title. Bought it in 2001, refinanced in 2002. Only one mortgage on it.
I bought my house "For Sale By Owner" and it went very smoothly. We wrote a contract at his kitchen table that we felt covered both of us. Put in there what he agreed to leave; blinds, fridge, washer and dryer, ect... I took the contract to the owner of my company at the time. He laughed and said as long as neither of you back out it's as good as any lawyer mumbo jumbo. Worked out great for both of us. Took it to a lawyer at closing and signed all the paperwork. Done and done
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Old 02-18-2015, 12:40 PM   #2269
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Clean title. Bought it in 2001, refinanced in 2002. Only one mortgage on it.
Yup, lawyer/title service. I sold my house this way a little over a year ago, cost me like $1,200 TOTAL... it was awesome.
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Old 02-18-2015, 01:06 PM   #2270
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Yup, lawyer/title service. I sold my house this way a little over a year ago, cost me like $1,200 TOTAL... it was awesome.
Yep, this. The only reason we are needed is to really help sell someones house from the seller side. The buy side has a lot more to do. If you've already found someone I'd go through the lawyer/title company route. And you already know them.

If it was a stranger coming in off the streets I'd be inclined to tell you to have an agent at least represent one end of the deal.
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Old 02-28-2015, 11:13 PM   #2271
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Yup. Back to going up and out of control. Bid 26K over asking + willing to eat 2K of repairs in the sellers bug report. 18 offers and I was not on top.
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Old 03-01-2015, 12:39 AM   #2272
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Meh... A lot of it isn't necessarily how much your willing to bid, but your terms.

Ie: You can bid $20k over but if somebody else is putting $200k down in cash and can close in 15 days, but is only offering the asking price vs. somebody putting $20k down with questionable financing offering $20k over. Guess who they're going to pick?
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Old 03-01-2015, 01:00 AM   #2273
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Tell that to the people we tried buying this land from last spring. All cash, close in two weeks... Granted, we wanted a break on the price because they were asking $40k more than market, but had a higher offer with financing.


Guess what? That land is still for sale and we bought another property which our custom home is nearing completion.
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Old 03-01-2015, 11:41 AM   #2274
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Meh... A lot of it isn't necessarily how much your willing to bid, but your terms.

Ie: You can bid $20k over but if somebody else is putting $200k down in cash and can close in 15 days, but is only offering the asking price vs. somebody putting $20k down with questionable financing offering $20k over. Guess who they're going to pick?
I offered 15K deposit + 160K at closing (to stay out of jumbo) + 15 day close + 2 months rent back (seller's request) + eat 2K in bug report repairs (seller's request) + 26K over asking + 2 cases of wine (wife's idea) & my credit rating is stellar. With 18 offers I'm pretty sure I just plain got out bid.
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Old 03-01-2015, 11:47 AM   #2275
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Tell that to the people we tried buying this land from last spring. All cash, close in two weeks... Granted, we wanted a break on the price because they were asking $40k more than market, but had a higher offer with financing.


Guess what? That land is still for sale and we bought another property which our custom home is nearing completion.
Sometimes the seller goes with what looks like the better offer then the finances for the buyer doesn't work out. If the other buyer is financing and the property doesn't appraise at the value their lender isn't just going to give them the money. In this environment I don't think a lender is going to be loaning out money on property that doesn't hit the appraisal. Usually the all cash deal wins. I guess the seller picked poorly in this case.
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